The WSJ’s Christopher Mims reports that “after peaking at $84 billion in 2000 [venture capital funding] fell to $18 billion in 2003 before surging back to $68 billion in 2015.” Venture capital funding doesn’t include growth in R&D spending by Google, Facebook, Amazon, and Apple from less than $10 billion in 2000 to $60 billion today. Mims reports that, despite hi-tech growth in cities like New York, Boston and LA, San Fran’s share of venture funding has risen from about 35% in 2000 to almost 50% today. Mims credits that growth to a larger and more liquid pool of tech and management talent and more visibility to venture investors. He also notes that startups with access to these assets receive higher valuations on average and that successful startups outside of the Bay Area are increasing relocating to improve their access.
In my upcoming book, The Upside of Inequality: How Good Intentions Undermine the Middle Class (September 13), I explain how gradually compounding expertise from more valauble on-the-job training at companies like Google, communities of expertise like Silicon Valley, and equity in the pockets of successful risk-takers, increases the certainty of succesful risk-taking and how, in turn, this incentivizes a larger pool of properly trained, talented, and motivated risk-takers.
